HP Spends Big Bucks to Court Dotcoms

HP is sinking $1.5 billion into a new Garage Program that aims to attract start-ups with discounted products, flexible financing options and co-marketing efforts. The Garage Program is an extension of a $1 billion program that HP aimed at start-ups last year.

The HP Garage Program offers qualifying start-ups—those having at least $250,000 in capital and a solid business plan—up to $2 million in financing for "essentials," including HP hardware, storage, consulting, support and training. Payments are deferred for six months.

"There are a couple of key parts to this program," Gina Cassinelli, HP's Executive Director of e-services, explained in a broadcast that followed the announcement. "First is the architectural design. We want them [dotcoms] to architect things right, right from the beginning. Secondly, we want to help many of these start-ups finance their operations." The financing, Cassellini said, will enable start-ups to preserve their capital to spend on "things like brand building and pulling in resources."

HP obviously wants to cozy up to the new businesses that may develop into the major companies of tomorrow. "It's important for us to get in on the ground floor to work with these guys closely," Cassellini says. "We're in the infrastructure business."

Developing strong relationships with promising dotcoms may be the main purpose of the Garage Program, but HP sees another opportunity. Cassellini points out that as existing brick-and-mortar companies consider bringing their assets to the Web, they face many of the same issues as start-ups. HP does not want to be left behind as traditional companies morph into e-businesses. "We want to help existing customers get access to and grow from all the new services brought to bear because of all the new companies bringing services to market," says Cassellini.

HP is not the first hardware vendor to eye start-ups. IBM has earmarked $500 million, Sun $300 million, and Compaq $1.5 billion for similar ventures. The traditional hardware vendors are realizing they can no longer simply sell boxes but must become trusted partners, offering a variety of products collected and integrated from various parts of their organizations. The hardware vendors also see money in financing deals, not only from the deals themselves but also from the sales generated by new business partners as they become part of the organizations' sales channels.